SAN FRANCISCO--(BUSINESS WIRE)--
Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company's
financial results for the fourth quarter and fiscal year that ended
September 26, 2014. For the fourth quarter, Dolby reported total revenue
of $227.0 million, compared to $216.7 million for the fourth quarter of
fiscal year 2013. For fiscal 2014, Dolby reported total revenue of
$960.2 million, compared to $909.7 million for fiscal year 2013.

Fourth quarter GAAP net income was $45.9 million, or $0.44 per diluted
share, compared to $45.8 million, or $0.44 per diluted share, for the
fourth quarter of fiscal 2013. On a non-GAAP basis, fourth quarter net
income was $60.8 million, or $0.58 per diluted share, compared to $58.8
million, or $0.57 per diluted share, for the fourth quarter of fiscal
2013.

Fiscal 2014 GAAP net income was $206.1 million, or $1.99 per diluted
share, compared to $189.3 million, or $1.84 per diluted share, for
fiscal 2013. On a non-GAAP basis, fiscal 2014 net income was $267.4
million, or $2.58 per diluted share, compared to $250.1 million, or
$2.43 per diluted share, for fiscal 2013. Dolby's non-GAAP measures are
described and reconciled to the corresponding GAAP measures at the end
of this release.

"Fourth quarter revenues were better than expected, and we delivered
top-line growth for the year," said Kevin Yeaman, President and CEO,
Dolby Laboratories. "Our broadcast business continues to outperform
globally. I'm also excited we are bringing the amazing Dolby Atmos
experience to the home and mobile devices."

Dividend

The Company announced that its Board of Directors has approved a
quarterly dividend program for its stockholders. The first dividend
payment of $0.10 per share of Class A and Class B Common Stock will be
paid on November 20, 2014, to stockholders of record as of the close of
business on November 3, 2014.

Stock Repurchase Program

The Company announced that its Board of Directors has approved
increasing the size of its stock repurchase program by an additional
$200 million, bringing the amount available for future repurchases of
the Company's Class A Common Stock to $260 million. Stock repurchases
under this program may be made through open market transactions,
negotiated purchases, or otherwise, at times and in such amounts as the
Company considers appropriate.

Financial Outlook

Guidance for Q1 and fiscal year 2015 includes the financial impact of
Dolby's proposed acquisition of Doremi Labs, which is expected to close
by early November 2014. The financial impact of Dolby's proposed
acquisition of Doremi Labs is expected to add about $35 million to $50
million of revenue and about $20 million of operating expenses in fiscal
year 2015.

Q1 2015

Dolby estimates that total revenue will range from $235 million to $245
million. Gross margin percentages are projected to range between
approximately 88 percent and 89 percent on a GAAP basis and between 89
percent and 90 percent on a non-GAAP basis.

Dolby anticipates that operating expenses will be between approximately
$159 million and $164 million on a GAAP basis and between $140 million
and $145 million on a non-GAAP basis.

Dolby expects diluted earnings per share to be between $0.35 and $0.40
on a GAAP basis and between $0.51 and $0.55 on a non-GAAP basis.

The Company estimates that its fiscal Q1 2015 effective tax rate will be
between approximately 24 percent and 26 percent on both a GAAP and
non-GAAP basis.

Fiscal Year 2015

Dolby anticipates that total revenue will range from $970 million to $1
billion.

Dolby anticipates that operating expenses will be between approximately
$661 million and $671 million on a GAAP basis and between $585 million
and $595 million on a non-GAAP basis.

The Company's Conference Call Information

Members of Dolby management will lead a conference call open to all
interested parties to discuss Q4 and year-end fiscal 2014 financial
results for Dolby Laboratories at 2:00 p.m. PT (5:00 p.m. ET) on
Thursday, October 23, 2014. Access to the teleconference will be
available over the Internet from http://investor.dolby.com/events.cfm
or by dialing 1-888-471-3842. International callers can access the
conference call at 1-719-457-2714.

A replay of the call will be available from 5:00 p.m. PT on Thursday,
October 23, 2014, until 9:00 p.m. PT on Thursday, October 30, 2014, by
dialing 1-877-870-5176 (international callers can access the replay by
dialing 1-858-384-5517) and entering the confirmation code 9228338. An
archived version of the teleconference will also be available on the
Dolby Laboratories website, http://investor.dolby.com/events.cfm.

Non-GAAP Financial Information

To supplement Dolby's financial statements presented on a GAAP basis,
Dolby provides certain non-GAAP financial measures. These measures are
adjusted to exclude amounts related to stock-based compensation, expense
associated with dividend equivalents paid on restricted stock units, the
amortization of intangibles from business combinations, restructuring
charges, and the related tax impact of these items. Dolby presents
non-GAAP financial measures in reporting its financial results to
provide investors with an additional tool to evaluate Dolby's operating
results in a manner that focuses on what Dolby's management believes to
be its ongoing business operations. Dolby's management believes it is
useful for itself and investors to review both GAAP and non-GAAP
measures in order to assess the performance of Dolby's business for
planning and forecasting in subsequent periods. Dolby's management does
not itself, nor does it suggest that investors should, consider non-GAAP
financial measures in isolation from, or as a substitute for, financial
information prepared in accordance with GAAP. Whenever Dolby uses
non-GAAP financial measures, it provides a reconciliation of the
non-GAAP financial measures to the most closely applicable GAAP
financial measures. Investors are encouraged to review the related GAAP
financial measures and the reconciliation of these non-GAAP financial
measures to their most directly comparable GAAP financial measures as
detailed above. Investors are also encouraged to review Dolby's GAAP
financial statements as reported in its US Securities and Exchange
Commission (SEC) filings. A reconciliation between GAAP and non-GAAP
financial measures is provided at the end of this press release and on
Dolby's investor relations website at http://investor.dolby.com/events.cfm.

Forward-Looking Statements

Certain statements in this press release, including, but not limited to,
statements relating to Dolby's expected financial results for Q1 2015
and fiscal 2015, and future quarterly dividend payments, are
"forward-looking statements" that are subject to risks and
uncertainties. These forward-looking statements are based on
management's current expectations, and as a result of certain risks and
uncertainties, actual results may differ materially from those
projected. The following important factors, without limitation, could
cause actual results to differ materially from those in the
forward-looking statements: risks associated with trends in the markets
in which Dolby operates, including the personal computer, DVD, and
Blu-ray Disc™, broadcast, consumer electronics, gaming, mobile, and
automobile markets; the loss of, or reduction in sales by, a key
customer or licensee; pricing pressures; risks associated with the rate
at which OEMs include optical disc playback in Windows® 8 devices and
the rate of consumer adoption of Windows operating systems; risks that a
shift from disc-based media to online media content could result in
fewer devices with Dolby® technologies; risks associated with
the effects of macroeconomic conditions, including trends in consumer
spending; risks relating to the expiration of patents; the timing of
Dolby's receipt of royalty reports and payments from its licensees,
including back payments; timing of revenue recognition under licensing
agreements and other contractual arrangements; Dolby's accuracy of
calculation of royalties due to its licensors; Dolby's ability to
develop, maintain, and strengthen relationships with industry
participants; Dolby's ability to develop and deliver innovative
technologies in response to new and growing markets in the entertainment
industry; competitive risks; risks associated with conducting business
in China and other countries that have historically limited recognition
and enforcement of intellectual property and contractual rights; risks
associated with the health of the motion picture industry generally; the
development and growth of the market for digital cinema and digital 3D
and Dolby's ability to successfully penetrate this market; Dolby's
ability to expand its business generally, and to expand its business
beyond sound technologies to other technologies related to digital
entertainment delivery; risks associated with acquiring and successfully
integrating businesses or technologies; and other risks detailed in
Dolby's SEC filings and reports, including the risks identified under
the section captioned "Risk Factors" in its most recent quarterly report
on Form 10-Q. Dolby disclaims any obligation to update information
contained in these forward-looking statements, whether as a result of
new information, future events, or otherwise.

About Dolby Laboratories

Dolby Laboratories (NYSE:DLB) creates audio, video, and voice
technologies that transform entertainment and communications in mobile
devices, at the cinema, at home, and at work. For nearly 50 years, sight
and sound experiences have become more vibrant, clear, and powerful in
Dolby. For more information, please visit www.dolby.com.

Dolby and the double-D symbol are registered trademarks of Dolby
Laboratories. Blu-ray Disc is a trademark of Blu-ray Disc Association.
Windows is a registered trademark of Microsoft Corporation. S14/28355
DLB-F

DOLBY LABORATORIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Fiscal Quarter Ended

Fiscal Year Ended

September 26, 2014

September 27, 2013

September 26, 2014

September 27, 2013

Revenue:

(unaudited)

(unaudited)

(unaudited)

Licensing

$

208,943

$

191,043

$

878,844

$

807,081

Products

13,581

19,998

59,219

80,603

Services

4,433

5,611

22,113

21,990

Total revenue

226,957

216,652

960,176

909,674

Cost of revenue:

Cost of licensing

(1,318

)

3,314

10,814

16,856

Cost of products

10,191

16,306

45,132

64,270

Cost of services

3,547

3,871

14,230

15,593

Total cost of revenue

12,420

23,491

70,176

96,719

Gross margin

214,537

193,161

890,000

812,955

Operating expenses:

Research and development

47,081

41,447

183,128

168,746

Sales and marketing

63,838

56,024

252,647

231,103

General and administrative

45,534

38,646

178,104

161,970

Restructuring charges/(credits)

(210

)

(56

)

2,403

5,874

Total operating expenses

156,243

136,061

616,282

567,693

Operating income

58,294

57,100

273,718

245,262

Other income/expense:

Interest income

811

785

3,344

3,848

Interest expense

639

(71

)

183

(575

)

Other income/(expense), net

918

1,054

(1,146

)

2,111

Total other income/expense

2,368

1,768

2,381

5,384

Income before income taxes

60,662

58,868

276,099

250,646

Provision for income taxes

(14,300

)

(12,784

)

(67,379

)

(60,344

)

Net income including controlling interest

46,362

46,084

208,720

190,302

Less: net (income) attributable to controlling interest

(421

)

(289

)

(2,617

)

(1,031

)

Net income attributable to Dolby Laboratories, Inc.

$

45,941

$

45,795

$

206,103

$

189,271

Net Income Per Share:

Basic

$

0.45

$

0.45

$

2.02

$

1.86

Diluted

$

0.44

$

0.44

$

1.99

$

1.84

Weighted-Average Shares Outstanding:

Basic

102,211

101,768

102,151

101,879

Diluted

104,116

102,976

103,632

102,788

DOLBY LABORATORIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

September 26, 2014

September 27, 2013

ASSETS

(unaudited)

Current assets:

Cash and cash equivalents

$

568,472

$

454,397

Restricted cash

2,142

3,175

Short-term investments

231,208

140,267

Accounts receivable

86,168

97,460

Inventories

8,536

10,093

Deferred taxes

86,445

84,238

Prepaid expenses and other current assets

22,880

28,949

Total current assets

1,005,851

818,579

Long-term investments

296,335

306,338

Property, plant and equipment, net

289,755

242,917

Intangible assets, net

63,700

41,315

Goodwill

277,574

279,724

Deferred taxes

41,746

37,434

Other non-current assets

9,051

11,638

Total assets

$

1,984,012

$

1,737,945

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

15,898

$

10,695

Accrued liabilities

158,376

137,795

Income taxes payable

2,600

3,394

Deferred revenue

12,496

20,931

Total current liabilities

189,370

172,815

Long-term deferred revenue

19,279

19,663

Other non-current liabilities

43,715

45,441

Total liabilities

252,364

237,919

Stockholders' equity:

Class A common stock

51

47

Class B common stock

52

55

Additional paid-in capital

46,415

18,812

Retained earnings

1,660,485

1,454,382

Accumulated other comprehensive income

3,014

7,814

Total stockholders' equity - Dolby Laboratories, Inc.

1,710,017

1,481,110

Controlling interest

21,631

18,916

Total stockholders' equity

1,731,648

1,500,026

Total liabilities and stockholders' equity

$

1,984,012

$

1,737,945

DOLBY LABORATORIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Fiscal Quarter Ended

Fiscal Year Ended

September 26, 2014

September 27, 2013

September 26, 2014

September 27, 2013

Operating activities:

(unaudited)

(unaudited)

(unaudited)

Net income including controlling interest

$

46,362

$

46,084

$

208,720

$

190,302

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization

14,287

13,630

53,278

53,245

Stock-based compensation

16,907

14,396

65,680

64,328

Amortization of premium on investments

2,342

2,133

9,398

10,234

Excess tax benefit from exercise of stock options

(577

)

146

(2,434

)

(475

)

Provision for doubtful accounts

494

(85

)

1,119

(174

)

Deferred income taxes

3,240

(6,669

)

(6,696

)

(19,642

)

Other non-cash items affecting net income

(634

)

(226

)

1,821

(1,026

)

Changes in operating assets and liabilities:

Accounts receivable

8,584

(22,810

)

10,165

(53,639

)

Inventories

1,164

3,530

3,818

9,166

Prepaid expenses and other assets

1,447

(3,150

)

(354

)

5,731

Accounts payable and other liabilities

16,681

22,730

33,714

21,890

Income taxes, net

(10,879

)

5,478

951

2,314

Deferred revenue

(778

)

(1,731

)

(8,734

)

(1,076

)

Other non-current liabilities

529

(6,400

)

691

(4,677

)

Net cash provided by operating activities

99,169

67,056

371,137

276,501

Investing activities:

Purchase of investments

(85,932

)

(68,682

)

(389,282

)

(485,370

)

Proceeds from sales of investment securities

19,262

14,630

159,559

548,739

Proceeds from maturities of investment securities

31,457

50,904

137,059

143,754

Purchases of property, plant and equipment

(51,186

)

(8,910

)

(88,308

)

(26,711

)

Purchases of intangible assets

(18,000

)

—

(37,950

)

(4,050

)

Proceeds from sale of property, plant and equipment and assets held
for sale

—

127

3,355

503

Payment related to prior business combination

(6,708

)

—

(6,708

)

—

Change in restricted cash

1,192

117

1,033

(1,840

)

Net cash provided by/(used in) investing activities

(109,915

)

(11,814

)

(221,242

)

175,025

Financing activities:

Payments on debt

—

(79

)

—

(79

)

Proceeds from issuance of common stock

9,226

2,342

33,373

15,958

Repurchase of common stock

(15,070

)

(8,103

)

(56,028

)

(82,245

)

Payment of cash dividend

—

—

—

(408,206

)

Distribution to controlling interest

—

—

—

(5,039

)

Excess tax benefit from the exercise of stock options

577

(146

)

2,434

475

Shares repurchased for tax withholdings on vesting of restricted
stock

(4,430

)

(3,119

)

(13,651

)

(8,828

)

Net cash used in financing activities

(9,697

)

(9,105

)

(33,872

)

(487,964

)

Effect of foreign exchange rate changes on cash and cash equivalents

(1,182

)

(301

)

(1,948

)

(1,765

)

Net increase/(decrease) in cash and cash equivalents

(21,625

)

45,836

114,075

(38,203

)

Cash and cash equivalents at beginning of period

590,097

408,561

454,397

492,600

Cash and cash equivalents at end of period

$

568,472

$

454,397

$

568,472

$

454,397

GAAP to Non-GAAP Reconciliations

(In millions, except per share data)

The following tables present the Company's GAAP financial measures
reconciled to the non-GAAP financial measures included in this
release for the fourth quarter of fiscal 2014 and 2013 and fiscal
2014 and 2013:

Net income:

Fiscal Quarter Ended

Fiscal Year Ended

September 26, 2014

September 27, 2013

September 26, 2014

September 27, 2013

GAAP net income

$

45.9

$

45.8

$

206.1

$

189.3

Stock-based compensation

16.9

14.4

65.7

62.4

RSU dividend equivalent

0.7

1.0

3.0

4.2

Amortization of acquired intangibles

2.8

3.2

11.3

13.2

Restructuring charges, net

(0.2

)

—

2.4

5.9

Income tax adjustments

(5.3

)

(5.6

)

(21.1

)

(24.9

)

Non-GAAP net income

$

60.8

$

58.8

$

267.4

$

250.1

Diluted earnings per share:

Fiscal Quarter Ended

Fiscal Year Ended

September 26, 2014

September 27, 2013

September 26, 2014

September 27, 2013

GAAP diluted earnings per share

$

0.44

$

0.44

$

1.99

$

1.84

Stock-based compensation

0.16

0.14

0.62

0.61

RSU dividend equivalent

0.01

0.01

0.04

0.04

Amortization of acquired intangibles

0.03

0.03

0.11

0.12

Restructuring charges, net

—

—

0.02

0.06

Income tax adjustments

(0.06

)

(0.05

)

(0.20

)

(0.24

)

Non-GAAP diluted earnings per share

$

0.58

$

0.57

$

2.58

$

2.43

Shares used in computing diluted earnings per share (in millions)

104

103

104

103

The following tables present a reconciliation between GAAP and
non-GAAP versions of the estimated financial amounts for the first
quarter of fiscal 2015 and fiscal year 2015 included in this release: